Peter Markeas & Ors v Greek Orthodox Community of St Constantinos & Eleni & Ors No. Scgrg-96-2113 Judgment No. 6292 Number of Pages 4 Associations and Clubs

[1997] SASC 6292

IN THE SUPREME COURT OF SOUTH AUSTRALIA

DEBELLE J

Associations and clubs - general matters - rules and meetings - incorporated associations - rules - amendment to rules - legislation requiring special resolution in absence of alternative provision - whether rules contained alternative provision - extent of power of court to alter the rules. Associations Incorporation Act 1985s23, s24(1), s24(3), 61, 61(2), 61(2)(k), 61(7), referred to.

ADELAIDE, 5 August 1997 (hearing), 5 August 1997 (decision)

#DATE 5:8:1997

#ADD 4:9:1997

Plaintif:

Counsel: Mr P Heywood-Smith

Solicitors: Wallmans

Defendant :

Counsel: Mr M Abbott QC with Mr H Patsouris

Solicitors: Patsouris and Associates

Order: matter adjourned.

DEBELLE J

The Greek Orthodox Church at Renmark is called The Church of the Saints Constantinos and Eleni. The church is run by an association incorporated pursuant to the Associations Incorporations Act 1985 ("the Act"). The association is called the "Greek Orthodox Community of Saints Constantinos and Eleni, Renmark, SA, Incorporated." I will refer to it as "the Association". The plaintiffs are members of the Association. The first defendant is the Association; the second defendant, Evangelos Dedes, is the President of the Association; the third defendant, Con Poulos, is the Secretary; and the fourth defendant, Andrew Eleftheriadis, is the Public Officer of the Association. I will refer to them respectively as the President, Secretary and Public Officer.

On 6 October 1973, at an extraordinary general meeting of members of the Association, the rules of the Association were amended by deleting the existing rule 24 and substituting a new rule. The new rule 24 provided for amendments to the rules of the Association. It provided that a motion to vary or amend part or the whole of any rule should be carried only by an extraordinary meeting of the members convened especially for the purpose, with the exception that the rules relating to the name, objects and that rule could not be altered. At that meeting other amendments were made to the rules but they are not relevant for the purposes of these proceedings.

On 6 February 1995, at an extraordinary general meeting of members of the Association, the rules of the Association were again amended. It is unnecessary to refer to all of the amendments. For present purposes it is sufficient to note that a new rule 27 was introduced into the rules. That rule provided for what should occur if the Archdiocese should fail to provide certain services and, in particular, fail to appoint a priest to the church.

On 10 May 1996, the President and Secretary of the Association, who had the authority to do so, circulated a notice to members calling an extraordinary general meeting to be held on 10 June 1996. The meeting was called for the purpose of considering an amendment to the rules of the Association to delete clause 27. The meeting was held on 10 June 1996. The question whether rule 27 should be removed from the rules of the Association was put to a secret ballot at the meeting. The result of the ballot was:

For: 196 Against: 116 Invalid Votes: 2 Total 314

Thus, the motion was carried by an ordinary majority of the members. That majority was, in fact, some 62.4% of the members who voted. When the result of the ballot was announced the President announced that he was not sure whether the motion had been carried. He said that the committee would seek legal advice. The meeting concluded at about 9.45 p.m.

The committee of the Association went ahead and sought legal advice. On receipt of that advice, the President and Secretary sent a notice dated 5 July 1996 to members declaring that the motion had been carried. On 25 June 1996, the Public Officer had already applied to the Corporate Affairs Commission pursuant to s.24(3) of the Act to register the resolution, and thereby seek to effect an alteration to the rules. The application was accepted by the Commission.

By letter dated 28 August 1996 the plaintiffs asked the President and the committee of the Association to withdraw the application to the Commission. The committee refused to do so. The plaintiffs brought this action seeking an order declaring that the resolution of 10 June 1996 was ineffective to amend the rules of the Association. They sought consequential orders to rectify the rules of the Association and to rectify the records of the Commission. They sought other ancilliary orders.

The plaintiffs bring this action pursuant to s.61 of the Act. Section 61 empowers a member of an incorporated association to apply to this court for an order when the member believes that the affairs of the Association are being conducted in a manner that is oppressive, or unfairly prejudicial to, or unfairly discriminatory against a member or members, or in a manner that is contrary to the interests of the members as a whole. Section 61(7) of the Act deems that a breach of the rules of an Association may be regarded as action that is oppressive to the members of the Association. It is the plaintiffs' case that the amendment which deleted rule 27 had to be carried by a special resolution as defined by the Act. Section 24(1) of the Act provides:

"An alteration to the rule of an incorporated Association may be made by a special resolution of the Association unless other provision is made in the rules of the Association."

Section 3 of the Act defines a special resolution in terms which require a majority of not less than three-quarters of the members voting at the meeting. Since the resolution had been carried by an ordinary majority, they claim that the amendment is ineffective and thereby constitutes a breach of the rules of the Association. The plaintiffs, therefore, have standing to bring this action.

When this action was called on for hearing, counsel for the parties announced that the parties appeared to be able to resolve their differences. An adjournment was granted and in consequence the parties have now agreed a compromise of the action. I congratulate them for that. They have agreed that the resolution carried on 10 June 1996 to remove rule 27 should stand. They have also agreed that rule 24 should be amended so that in the future a special resolution is required to amend the rules. The compromise which they have reached, which is embodied in a deed, extends to other issues which go beyond the issues raised in this action. In large part those matters concern other amendments to the rules.

I have been asked to make an order pursuant to s.61(2) altering the rules of the Association to give effect to their agreement. Section 61(2) empowers the court when satisfied that the affairs of the Association are being conducted in a manner which is oppressive to the members of the Association to make such order or orders as it thinks fit and, without limiting the generality of that power, make an order for the alteration of the rules of the Association. The particular power is to be found in s.61(2)(k). The power to alter the rules of an Association may, of course, be exercised, to give effect to the decision of the court. Thus, it is entirely appropriate for the court to alter rule 24 to make it clear that an amendment of the rules will henceforth only be effected by a special resolution as defined by the Act. However, the power cannot be used generally to amend the rules where parties to an action are agreed upon the amendments unless those parties have the capacity to bind all members, or at least three quarters of them. The rules are a contract between the members and the Association: see s.23 of the Act. They may be amended only by special resolution of the members in the absence of a provision to the contrary: see s.24(1). The parties to this action cannot impose their will on the other members of the Association by asking the court to alter the rules in accordance with their wishes. Thus, while I believe that the motives of the parties are entirely genuine and that they are acting bona fide, I am unable to give effect to all of their wishes. For the reasons which follow, I would nevertheless be prepared to make an order to give effect to the amendment they have agreed to rule 24, and to effect the compromise concerning the deletion of rule 27.

The effect of s.24 of the Act is that the rules may be amended only by special resolution unless other provision is made in the rules of the Association. A special resolution is defined by the Act in terms which specify that the required majority must be three quarters of the members who vote at the meeting. If it is intended that the rules of an association should provide some other proposition for members to vote an amendment to the rules must specify what the proposition should be. Rule 24 does not specify the required proposition of members. It does not specify what is the required majority. In my view, rule 24 is not, therefore, a provision which overrides s.24 of the Act. Thus, a special resolution is required to amend the rules of the Association.

I am also prepared to make an order to the effect that the amendment to the rules on 10 July 1996 which deleted rule 27 should stand. This order can, of course, only bind the parties to this action, and it is open to any other member of the Association to challenge the rule if so advised.

However, for the reasons already expressed, I am not prepared to make the other orders sought by the parties, that is to say, to make the other alteration to the rules. It was submitted that s.27 of the Supreme Court Act invested the court with power do so. It appears that the proposed amendments will resolve differences which have existed for some time and to that extent avoid future litigation. I am prepared to proceed on the footing that s.27 should receive a liberal interpretation. However, it cannot empower the court to alter the rules of an Association when the views of the members as a whole have not been ascertained.

It would be wrong to understand what has been said in these reasons as suggesting that I do not believe that the compromise which has been reached by the parties is satisfactory. Far from it. As I said earlier, the parties are to be commended for having reached this compromise. I have examined the terms of the deed of compromise. It is plainly in the best interests not only of the parties but also of the Greek Orthodox Community of this church to accept the compromise.

I have also examined the proposed amendments. Most of the amendments are intended to clarify the position of the Executive Committee and should not lead to any controversy. The important amendments are the introduction of a new clause 22A and an amendment to clause 24. Clause 22A provides a means by which the members in general meeting can give directions to the Executive Committee. It is for the members to decide whether to approve the amendments. The amendment to clause 24 expressly states that the rules can only be amended by special resolution. For the reasons already expressed, that is desirable. I add that, while it is, of course, for the members to decide, it is fair to point out that the amendment is in line with the general principle that amendments to rules of an association, be it an Association of this kind or the articles of association of a corporation, should only be made by special resolution. It is in that respect that the proposed amendment to clause 24 is desirable.

Given that the Associations Incorporations Act does not empower me to alter the rules of the Association in the way that the parties have agreed, the parties have decided that they should go to the members in general meeting seeking their approval to what they have agreed. That, of course, is to be desired. It is the only effective means by which they can bring about the compromise. The parties have, therefore, sought an adjournment to enable the meeting to be held. Given that the parties have executed the deed of compromise, I am willing to adopt this course. It is to be hoped that, at the meeting which is to be held, the differences which have in past years existed between members of the community will be put to rest.

For these reasons the hearing of this action will be adjourned to Wednesday, 17 September 1997.